Chapter 9 Mortgages and Notes

1
Chapter 9Mortgages and Notes

• __________________________________

2
Promissory Note

• Contract between a borrower and lender
• Obligor, obligee
• Principal
• Acceleration clause
• Signature

3
Note and Mortgage Sequence

• Step 1 Buyer gives note to lender
  and receives
• Step 2 Buyer pays to seller
  and receives deed
• Step 3 Buyer has clear title
  and gives mortgage to lender

4
The Mortgage Instrument

• A separate agreement from the note that provides
  collateral to the lender to back up the promise
  made in the note by the borrower/mortgagor.

5
Promissory Note Secured by Mortgage
PROMISSORY NOTE SECURED BY MORTGAGE 1 2
  City, State      March 31, 20xx   3 For value
received, I promise to pay to 4     Pennywise
Mortgage Company   , 5 or order, at   2242
National Blvd., City, State  , the sum of 6
  Ninety-six thousand and no/100   dollars, with
interest from   March 31, 20xx  , on unpaid
principal at the rate of 7  7  percent per
annum principal and interest payable in
installment of 8   six hundred thirty nine and
36/100   dollars on the   first   day of each
month beginning 9   May 1, 20xx  , and
continuing until said principal and interest have
been paid. 10 This note may be prepaid in whole
or in part at any time without penalty. 11
There shall be a ten-day grace period for each
monthly payment. A late fee of 25.00 will be
added to each payment made after its grace
period. 12 Each payment shall be credited first
on interest then due and the remainder on
principal. Unpaid interest shall bear interest
like the principal. 13 Should default be made
in payment of any installment when due, the
entire principal plus accrued interest shall
immediately become due at the option of the
holder of the note. 14 If legal action is
necessary to collect this note, I promise to pay
such sum as the court may fix. 15 This note is
secured by a mortgage bearing the same date as
this note and made in favor of   Pennywise
Mortgage Company  . 16     Mort Gage    
Borrower
6
Mortgage
MORTGAGE 1 THIS MORTGAGE is made this   31st  
day of   March, 20xx  , between   Mort Gage  
hereinafter called the Mortgagor, and   Pennywise
Mortgage Company   hereinafter called the
Mortgagee. 2 WHEREAS, the Mortgagor is indebted
to the Mortgagee in the principal sum of   ninety
six thousand and no/100   dollars, payable
  639.36, including 7 interest per annum, on
the first day of each month starting May 1, 20xx,
and continuing until paid  , as evidenced by the
Mortgagors note of the same date as this
mortgage, hereinafter called the Note. 3 TO
SECURE the Mortgagee the repayment of the
indebtedness evidenced by said Note, with
interest thereon, the Mortgagor does hereby
mortgage, grant, and convey to the Mortgagee the
following described property in the County of
Evans , State of            4 Lot 39, Block
17, Harrisons Subdivision, as shown on Page 19
of May Book 25, filed with the County Recorder of
said County and State. 5 FURTHERMORE, the
Mortgagor fully warrants the title to said land
and will defend the same against the lawful
claims of all persons. 6 IF THE MORTGAGOR, his
heirs, legal representatives, or assigns pay unto
the Mortgagee, his legal representatives or
assigns, all sums due by said Note, then this
mortgage and the estate created hereby SHALL
CEASE AND BE NULL AND VOID.
7
Mortgage (continued)
8
Covenants (promises)

• Covenant to pay taxes
• Covenant against removal
• Covenant of insurance
• Covenant of good repair
• Covenant of preservation maintenance

9
Debt Priorities

• First mortgage / Senior mortgage
• Second mortgage / Junior mortgage
• Subordination
• Chattel liens
• Foreclosure / Power of Sale

10
Mortgage Satisfaction

• Partial release
• Subject to
• Assumption
• Novation
• Estoppel

11
Overview of Mortgage Foreclosure
12
Key Terms

• Acceleration clause
• Deficiency judgment
• First mortgage
• Foreclosure
• Junior mortgage

• Mortgage
• Mortgagee
• Power of sale
• Promissory note
• Subordination